In November 1958, Economica carried an article by AWH (Bill) Phillips: “The Relation Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1862-1957“. Phillips, then LSE Economics Professor, had already made path-breaking contributions in the fields of stabilisation policy and economic modelling. He regarded his 1958 article (a “wet weekend’s bit of work”) as of only passing interest. Nevertheless, the 1958 article led to a re-shaping of macroeconomic policy for decades to come.
Bill Phillips was born in 1914 on a farm in Dannevirke, New Zealand, 200 kilometres from Wellington. His father experimented with technology, and built a small hydro-electric plant on a stream running through his property. Phillips had an adventurous youth, travelling through Australia (where he ran an outback movie theatre). Unusually for the time, he also travelled through South East Asia.
He trained as an electrician. However, his civilian life was interrupted by the Second World War. He was captured and held as a Japanese prisoner of war. Unlike many of his cohort, he survived; his character appears in the book Night of the New Moon (on which the film Merry Christmas Mr Lawrence, starring David Bowie, was based).
Arriving in London after the war, Phillips decided to study economics, and attended classes at the London School of Economics (LSE). Despite a rather undistinguished under-graduate career, he was invited to study for a post-graduate degree. Phillips was fascinated with the interactions of sectors across the economy. Using his engineering knowledge, he built a hydraulic model of the economy. His machine, the MONIAC, consisted of flows of water from one container to another, representing monetary flows – e.g. from consumption to income and thence, via an accelerator mechanism, to investment. “Leakages” to imports were included, and multiple models were built to represent multiple countries – interlinked by pipes. In practice, the models also suffered real leakages and demonstrations could be a damp affair!
James Meade, LSE Nobel prize-winner, was a keen collaborator with Phillips in this enterprise.Punch magazine even ran a special cartoon on the ingenious inventions. Today, only a few of the hydraulic models survive. LSE Model #1 is housed at the New Zealand Institute of Economic Research in Wellington; Model #2 is housed at the South Kensington Science Museum.
Phillips left London after the 1968 student riots and returned to Australasia, holding posts first at Australian National University and then at University of Auckland. He became one of the first western economists to turn his attention to Chinese developments; he presciently anticipated the rise of the Chinese economy despite its then parlous state.
Phillips’ health, always weak following his prison camp days, was not helped by his heavy smoking. He died in 1975, aged just 61. However his legacy in many fields lives on.
“Phillips Curve.” Econometrica: Journal of the Econometric Society, 1970, 38(4), pp. 190-93.
“Unemployment and Inflation Rates.” Accountancy, 1975, 88(983), pp. 15.
“Comments and Discussion.” Brookings Papers on Economic Activity, 1976a, (1), pp. 105-14.
“On Growth and Change.” Growth & Change, 1976b, 7(4), pp. 2.
“Paradigm Lost.” Economist, 1990, 317(7679), pp. 84-85.
“A Cruise around the Phillips Curve.” Economist, 1994, 330(7851), pp. 82-83.
“The Phillips Curve.” Economic Trends (Federal Reserve Bank of Cleveland), 1995, pp. 11.
“The Economy in Perspective.” Economic Trends (Federal Reserve Bank of Cleveland), 1996a, pp. 1.
“Monetary Policy.” Economic Trends (Federal Reserve Bank of Cleveland), 1996b, pp. 2.
“Greenspan’s Bet on the New Economy,” Business Week. McGraw-Hill Companies, Inc., 1997a, 84.
“Inflation, Unemployment, and the Phillips Curve.” Economic Trends (Federal Reserve Bank of Cleveland), 1997b, pp. 5.
“Nairu: Is It Useful for Monetary Policy?” FRBSF Economic Letter, 1997c, 97(35), pp. 1.
“The Greenspan Rule.” Wall Street Journal – Eastern Edition, 1999, 233(125), pp. A14.
“Output Gaps, Unemployment Gaps, and the Phillips Curve.” OECD Economic Surveys: Luxembourg, 2003, pp. 146-52.
“The Phillips Curve in Japan: Estimating the Relationship between Output and Inflation at Low Inflation Rates.” OECD Economic Surveys: Japan, 2004, 2003(18), pp. 203-06.
“Implications of Changes in Men’s and Women’s Labor Force Participation for Real Compensation Growth and Inflation.” Topics in Economic Analysis & Policy, 2005a, 5(1), pp. 1-25.
“Inflation Dynamics of Turkey: A Structural Estimation.” Studies in Nonlinear Dynamics & Econometrics, 2005b, 9(1), pp. 1-13
More on AWH Phillips
Bill Phillips’ orginal handworked calculations for his paper on the Phillips Curve comprise the background to this website.
Brian Easton’s article in the New Zealand Listener 12-18 July 2008 “Modest Achiever” compares Bill Phillips to Edmund Hillary and Ernest Rutherford and suggests that he should be honoured alongside them on New Zealand banknotes.
Alan Bollard discusses Bill Phillips and the MONIAC on Radio New Zealand on 8 July 2008 inOur Changing World and on 9 July 2008 on Nights.
The NZ Herald article on 9 July 2008 “The man behind the money machine” discusses Bill Phillips’ contribution to economics.
On 9 July 2008 Bernard Hickey discusses Alan Bollard’s reminiscences on the MONIAC “I found it a real pig of a thing to work” on the blog Interest.co.nz.
The National Business Review discusses the conference in honour of Bill Phillips on 3 July 2008 “RBNZ honours NZ crocodile hunter turned economist”
On 15 June 2008 in “Old Embers, New Flames” the Economic Principals blog discussed the Federal Reserve Bank of Boston conference on Cape Cod the previous week to mark the fiftieth anniversary of the publication of the Phillips curve.
In the Dominion Post on 14 June 2008 “Honouring a Kiwi genius“, James Weir profiles Bill Phillips.
Robert Leeson discusses “Phillips vs. Friedman: the Back Story” on the Wall Street Journalblog Real Time Economics on 11 June 2008.
The Guardian discusses “The computer model that once explained the British economy” on Thursday May 8 2008. This article has been cited by The SCSU scholars who discuss“Economic Hydraulics” on May 8 2008 and by Chris Higgins in Mental Floss “Modeling Economics Using Water” on 9 May 2008.
The Mostly Economics blog of 17 March 2008 asks the question “Why wasn’t Alban William Phillips given a Nobel Prize?”
The December 2007 edition of the Reserve Bank of New Zealand Bulletin has an artice on the MONIAC “Introducing the MONIAC: an early and innovative economic model“.
Nicholas Barr authored an article in the LSE Magazine “Bill Phillips: A Life Less Ordinary” in Winter 2007.
Nicolai Foss discusses “The Phillips Machine” on the Organisations and Markets blog on 2 November 2007.
The Engineering Department at Cambridge University restored one of the original Phillips machines “A Wonderful Thing is the Phillips Machine” in 2003.
Listen to the BBC programme on Bill Phillips’ computer “Water on the Brain” in its series onElectronic Brains broadcast in 2002.
Doron Swale discusses The Phillips Economic Computer in Resurrection, the Bulletin of the Computer Conservation Society and in “When Money Flowed Like Water” in Inc Magazine in 1995.
Brian Easton discusses AWH Phillips and his life in his column in the New Zealand Listener on 18 November, 1978.
Fortune magazine featured Bill Phillips’ machine in “Economics in Thirty Minutes” in March 1952.
The Econometric Society (Australasian Region) has a short biography of AW Phillips.
The History of Economic Thought website has an entry on AW Phillips and on Inflation and the Phillips Curve.
Kevin Hoover discusses the Phillips Curve in the Concise Encyclopedia of Economics.
Wikipedia has entries on William Phillips, the Phillips Curve and the MONIAC.
The New Zealand Institute of Economic Research (NZIER) has a replica of the MONIAC on loan to the Reserve Bank of New Zealand which has a display on Bill Phillips in its museum. TheScience Museum in London has Phillips’ Economic Computer on display.
Bill Phillips’ Financephalograph records a visit to the Science Museum and the impression the MONIAC made on the writer.
Pictures of Phillips’ Economic Computer 1949 (the MONIAC) are available from the Science and Society Picture Library.